ICICI bank changing gears – ditching ATM’s and unsecured loans

There is no time like recession to re-think your business strategy. Recession is also the time to know what wasn’t working and work towards what will work. That seems to be what every company is either thinking or doing. Only 2 days ago Bharti has re-structured its business to position itself for explosive growth. Now, we have ICICI bank which is changing gears.

Quite contrary to what Bharti has done, ICICI bank is spinning off one of the businesses which is not part of the core banking – the ATM’s. Setting up and maintaining an ATM is a lot of pain. And, ICICI bank does not do a very good job. I have seen umpteen times where an ICICI ATM is having a problem. Not just one location but multiple locations.

ICICI even resorted to dispensing only 100 rupee notes and limiting the transaction to 4000 rupees in some of the ATM’s. You know how much pain it would be to withdraw 10,000 rupees? That would be 3 transactions and a boat load of 100 rupee bills. Oh boy! I never run out of one of these stories do I?

ICICI bank has a network of more than 4000 ATM machines and over 2 lakh point of sale counters. It is spinning both of them. Many companies and private equity groups have already shown interest. Visa, FSS, Total Systems Services, KKR, Blackstone-CMS joint venture and Venture Infotek are the few companies in the race. This new set-up will be a proper company with stakeholders other than ICICI.

India has 35,000 machines for a population of 1.3 bn and China has 130,000 ATM’s and has the same population as India. A good indication that India need more ATM’s. It is also an indication that Indian banks are not doing a very good job of ramping up the ATMs.

Another interesting move is the shift in ICICI bank’s retail strategy. It is moving away from unsecured loans (personal loans & credit cards)Â to secured loans. Have you noticed a drop in tele-marketing calls off late – especially from ICICI? That is because it has stopped 95% of the outbound sales calls and is relying on asynchronous marketing channels like SMS. With a loss of 11.47 crores in credit card frauds can you blame ICICI?

Chanda Kochar is playing her cards right. ICICI bank was caught in a lot of controversies last year from its Lehman Brother’s exposure to bankruptcy rumors. This change in strategy will put the bank back on rails.